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What will be the effect on pretax income

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Question - Hans Inc. sells citrus fruit from its website. Protecting the fruit during shipping is critical to the company's success. Accordingly, Hans Inc fabricates its own shipping containers. Hans Inc ships 2,000,000 containers of fruit annually. Total costs to fabricate that many containers are provided below.

Volume 2,000,000 containers

Direct materials $520,000

Direct labor $960,000

Variable overhead $1,200,000

Fixed overhead $750,000

Total $3,430,000

A major paper products company has offered to supply all of the containers that Hans Inc needs at a price of $1.80 per container.

What will be the effect on pretax income if Hans Inc accepts this offer?

Reference no: EM133113117

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